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UNIVERSITY  OF  ILLINOIS 

LIBRARY 

Class 

Book                         Volume 

3^^ 

1 

■  ■ .  .-'■'' 


"^>l-V-'V '-T^'V -•'-'"'■"  i'f-'s 


RAILWAY  PROSPECTS  in  the  SOUTH 

ADDRESS  OF 

MR.  L  E.  JOHNSON 

PRESIDENT 

NORFOLK  &  WESTERN 

RAILWAY  COMPANY 

BEFORE 
COMMERCE  SECTION  OF  THE 

SOUTHERN  COMMERCIAL  CONGRESS 

ATLANTA,  GEORGIA 
MARCH  10,  1911 


Address  of  Mr,  L,  E.  Johnson^ 

President  Norfolk  Q  Western 

Railway  Company 


/ 


Mr.  Chairman,  Ladies^  and  Gentlemen: 

It  is  not  unnatural,  when  we  speak  of  "Railway  Pros- 
pects in  the  South,"  that  our  minds  should  hark  back  to 
the  beginnings  of  railway  development  and  ascertain  if 
the  lessons  of  the  past  may  not  give  us  something  upon 
which  we  may  predicate  the  future.  For  the  purpose 
of  studying  railway  accomplishment  and  railway  pro- 
gress and  prospects,  I  know  of  no  environment  more 
suited  to  the  purpose  than  within  the  borders  of  this 
great  capital  of  the  "Empire  State"  of  the  South, 
reared  as  it  has  been  by  southern  men  who  typify  the 
very  best  in  American  industry  and  culture.  Atlanta 
itself  sets  at  naught  all  the  traditions  of  the  more  remote 
past  and  brings  to  our  minds  the  knowledge  that  the 
introduction  and  development  of  railroads  has  meant 
the  establishment  of  a  new  industrial  force  in  the  pro- 
gress of  this  country  and  has  demonstrated  that  great 
industrial  centers  may  exist  and  thrive  away  from  lo- 
cations which  were  formerly  considered  necessary  to 
substantial  commercial  progress. 

If  any  one,  during  the  first  half  of  the  last  century, 
had  been  called  upon  to  predict  what  would  be  the  lo- 
cation of  Georgia's  greatest  city  during  the  years  which 
should  mark  the  opening  of  the  present  centiu-y,  he 
would  hardly  have  selected  the  location  which  marks 
the  gathering  place  at  this  moment  of  this  great  com- 
mercial congress. 

Men  who  had  studied  the  p9-st  and  gathered  together 
the  experience  of  former  ages  would  have  sought  at  the 
water's  edge  the  location  of  Georgia's  future  commercial 


31609 


and  industrial  center.  Probably  at  some  ample  harbor 
upon  the  seacoast,  or  at  least  upon  the  banks  of  some 
navigable  stream.  No  one  in  that  day  and  generation 
would  have  had  the  temerity  to  predict  that,  far  re- 
moved from  water  transportation,  there  should  be 
builded  up  this  great  metropolis  of  industrial  traffic, 
whose  influence  would  pervade  the  entire  South,  and 
rival  its  greatest  seaports.  That  Atlanta  exists  as  a 
dominating  factor  in  the  commerce  of  the  South,  indi- 
cates that  some  new  principle  has  become  a  part  of  our 
economic  development. 

Before  undertaking  to  say  a  word  or  two  in  regard  to 
the  present  ''Railway  Prospects,"  which  is  the  subject 
which  has  been  assigned  to  me,  it  will  doubtless  be 
profitable  to  reflect  a  moment  on  the  manner  in  which 
the  railway  construction  was  begun  in  the  South  and 
throughout  our  country  generally.  It  was  in  the  South 
that  the  operation  of  railroads  with  steam  as  the  sole 
motive  power  was  first  undertaken,  and  this  action 
adopted  by  the  Charleston  &  Hamburg  Railroad  Com- 
pany on  January  14th,  1830,  marks  an  epoch  in  the 
transportation  development  of  this  country.  It  was 
this  year  that  the  railroad  company  just  mentioned,  in 
pursuance  of  the  conclusions  reached  by  its  board  of 
directors,  issued  an  order  for  the  construction  of  a  loco- 
motive which  had  been  designed  by  a  citizen  of  Charles- 
ton and  which  was  built  at  the  West  Point  Foundry  in 
the  State  of  New  York.  The  name  borne  by  this 
locomotive,  the  first  used  in  regular  service,  was  "The 
Best  Friend  of  Charleston,"  and  it  is  needless  to  say 
that  the  name  so  adopted  was  a  fitting  title  for  the 
instrument  of  commerce  then  put  into  use  and  which 
has  become  so  large  a  factor  in  the  civilization  of  our 
countrv. 


1 


The  construction  of  railroads  in  the  early  history  of 
the  South  possessed  but  few  attractions  to  those  who 
had  money  to  invest  in  business  enterprises.  The  ex- 
periment was  considered  doubtful  and  the  undertaking 
highly  speculative;  and,  although  the  necessity  and 
advantage  of  more  adequate  transportation  facilities 
were  recognized,  and  appreciated  as  being  important 
in  the  development  of  the  country,  yet  so  indifferent 
was  private  capital  to  venture  upon  an  undertaking 
both  costly  and  uncertain,  that  very  few  of  the  roads 
of  the  South  in  its  early  history  were  constructed  purely 
through  individual  contribution.  As  a  matter  of  fact, 
the  promotion  and  construction  of  most  of  the  earlier 
built  roads  was  the  result  of  the  cooperation  of  the 
State  with  individuals,  to  which  was  generally  added 
the  aid  of  communities  and  cities  whose  interest  it  was 
thought  would  be  particularly  advanced  by  such  con- 
struction. In  other  words,  government  ownership  of 
railroads  is,  for  practical  purposes,  not  a  new  thing  in 
this  country,  but,  as  a  matter  of  fact,  it  is  an  experiment 
which  has  already  been  tried  and  while,  during  its  ex- 
istence, much  was  accomplished  which  under  other 
auspices  would  have  been  difficult,  yet  the  theory  has 
long  since  been  abandoned,  as  unsuited  to  the  con- 
ditions existing  in  our  country,  and  not  in  harmony 
with  our  form  of  government. 

However  valuable  and  necessary  the  aid  of  the  State 
was  in  the  beginning  of  railroad  construction  in  this 
country,  it  soon  became  apparent  that  railroad  opera- 
tion under  the  influence  and  control  of  governmental 
authority  was  unsatisfactory  and  unremunerative.  The 
states  soon  ascertained  that  the  properties  they  were 
undertaking  to  operate  were  generally  conducted  at 
an  annual   deficit,  and   even  if    profitable    the   State 


was  put  in  the  embarrassing  position  of  operating  prop- 
erties for  the  peculiar  benefit  of  one  portion  of  its  people 
and  one  of  its  sections  at  the  expense  of  the  other  sec- 
tions, and  the  conclusion  was  forced  upon  the  people 
that  it  was  no  part  of  the  function  of  the  government 
to  make  money  out  of  its  own  citizens  or  to  benefit  one 
at  the  cost  of  another.  Many  causes  cooperated  to 
bring  about  the  final  abandonment  by  the  states  of  their 
control  and  interest  in  their  railroads,  but  chiefly  was 
this  policy  of  abandonment  due  to  the  conviction  on  the 
part  of  the  people  that  the  operation  of  railroads,  in- 
volving the  employment  of  vast  numbers  of  men  and 
the  inauguration  of  competition  between  sections  and 
cities  equally  entitled  to  protection  and  consideration 
from  the  State,  made  it  impossible  for  the  State  wisely 
and  efficiently  to  carry  on  these  complicated  and 
hazardous  undertakings. 

While  these  policies  were  being  inaugurated  and  tried 
out  in  the  various  states  and  communities  of  the  South, 
the  Civil  War  came  on,  the  result  of  which  was  the 
annihilation  of  much  of  the  work  which  had  been  done  in 
railroad  construction  and,  for  many  years  thereafter, 
every  energy  of  the  people  of  the  South  was  devoted  to 
the  reconstruction,  consolidation  and  operation  of  these 
avenues  of  commerce.  The  states  did  not  undertake  to 
rehabilitate  the  roads,  but  usually  turned  them  over  to 
companies  financed  by  individuals  and,  for  all  practical 
purposes,  we  may  say  that  the  growth  of  railways  in  the 
South  since  the  year  1865  has  been  the  result  of  indi- 
vidual enterprise  and  corporate  energy. 

Before  we  can  say  what  is  the  '' Railway  Prospect" 
in  the  South  I  take  it  that  it  is  necessary  to  see  what  has 
been  accomplished  during  these  years  in  which  the  com- 
panies have  been  working  out  their  part  of  the  problems 


of  development,  for  I  take  it  that  if  the  railroads  of  the 
South  have  been  laggards  in  the  race  of  progress,  or 
have  so  conducted  their  affairs  that  there  is  in  the  minds 
of  the  people  a  lack  of  confidence  in  their  integrity, 
then  they  have  failed  to  do  their  part  in  the  upbuilding 
of  the  country,  and  have  been  lacking  in  patriotic  sac- 
rifice for  the  common  benefit  when  sacrifice  has  been 
necessary.  If  these  are  facts,  then  in  my  judgment  the 
prospect  for  the  future  cannot  be  encouraging. 

The  roads  have  had  a  fair  opportunity  to  do  the  work 
that  has  been  committed  to  them,  and  if  they  have 
failed  to  live  up  to  the  responsibilities  imposed,  and 
the  duties  assumed,  then  I  take  it  they  may  reasonably 
expect  the  same  reward  that  was  accorded  in  the  Scrip- 
ture to  the  unfaithful  servant:  "And  there  shall  be 
taken  from  him  even  that  which  he  hath." 

As  one  who  has  devoted  a  lifetime  to  the  construction 
and  operation  of  railroads  in  this  country,  and  whose 
maturer  years  have  been  spent  in  earnest  work  in  the 
development  of  railroad  transportation  in  the  South; 
and  who,  as  the  result  of  these  later  years  of  work,  has 
become  reasonably  well  acquainted  with  the  problems 
that  have  heretofore  been  met  and  handled  by  those 
who  have  had  to  meet  the  transportation  problems  of 
the  South,  I  wish  to  bear  emphatic  and  earnest  testi- 
mony that  no  just  or  intelligent  criticism  can  be  properly 
made  against  the  manner  in  which  your  people  have 
handled  a  problem  which  has  been  surrounded  with 
most  appalling  difficulties.  Indeed,  the  progress  that 
has  been  made  during  these  years  in  railroad  develop- 
ment cannot  fail  to  excite  the  wonder  and  admiration 
of  those  who  are  familiar  enough  with  the  situation 
to  realize  the  difficulties  which  have  been  overcome. 
Those  railroads  which  existed  at  the  close  of  the  war 


represented,  as  many  of  you  well  know,  but  little  else 
than  a  franchise  and  a  right  of  way,  and  the  work  of 
the  years  that  had  gone  before  had  been  to  a  large  ex- 
tent annihilated  as  the  result  of  four  years  of  enforced 
neglect,  and  I  defy  any  one  to  name  another  kind  of 
property  that  deteriorates  as  rapidly  as  a  railroad,  re- 
sulting from  lack  of  repair.  Eternal  vigilance,  and  no 
small  amount  of  money,  is  the  price  that  must  be  paid 
for  the  maintenance  and  continued  existence  of  a  rail- 
road, yet  these  roads  have  been  reconstructed  and  new 
lines  have  been  built  to  an  extent  that  has  been  mar- 
velous, considering  the  difficulties  that  had  to  be 
overcome.  Although  a  vast  amount  of  mileage  is  yet 
to  be  constructed  in  order  that  the  transportation  facili- 
ties of  the  South  shall  be  equal  to  many  other  sections 
of  our  country,  still  the  work  that  has  been  accomplished 
makes  the  problems  of  this  generation  easier  and  the 
way  is  open,  if  other  conditions  shall  be  favorable,  for 
this  great  work  to  go  forward  to  its  complete  develop- 
ment. 

Statistics  of  railroad  accomplishment  are  not  easily 
available,  except  during  the  past  twenty  years.  If  we 
had  the  statistics  of  the  work  done  during  the  quarter 
of  a  century  succeeding  the  closing  of  the  war,  the  per- 
centages of  comparison,  year  by  year,  would  be  ex- 
tremely interesting  and  would  in  every  instance,  I 
believe,  show  an  amount  of  progress,  even  under  the 
depressing  conditions  that  existed  during  much  of  that 
time,  that  would  reflect  tremendous  credit  upon  those 
who  were  fighting  the  industrial  battles  of  that  day. 

I  invite  your  attention,  however,  to  a  few  simple 

statistics  of  the  past  twenty  years,  believing  that  they 

ought  to  be  sufficient  to  satisfy  the  most  critical,  that 

he  railroads  of  the  South  have  not  been  negligent  of 


the  responsibilities  resting  upon  them,  but,  in  truth 
and  in  fact,  have  been  diligent  in  providing  facilities 
for  the  development  of  the  common  interests.  The 
result  of  the  activity  and  energy  of  your  people  who 
undertook  to  rehabilitate  the  railroads  of  the  South, 
showed  as  the  result  of  their  achievement  up  to  the 
year  1890,  the  existence  of  24,535  miles  of  single  track, 
30  miles  of  second  track,  and  3,265  miles  of  yard  track 
and  sidings,  in  the  section  south  of  the  Potomac  and 
Ohio  Rivers,  and  east  of  the  Mississippi.  After  that 
year,  the  development  was  not  so  marked  in  the  exten- 
sion of  new  lines  of  road,  although  the  construction  of 
such  new  lines  was  very  substantial,  but  was  shown  in 
the  construction  of  facilities  for  the  handling  of  the 
business  which  the  earlier  railroad  construction  had 
made  possible.  In  1909,  the  amount  of  single  track 
had  increased  to  41,273  miles,  second  track  to  1,656 
miles,  and  yard  track  and  sidings  had  increased  to 
11,247  miles.  These  figures  would  seem  to  indicate 
that  the  railroads  of  the  South  have  been  keeping  pace 
with  the  industrial  development  and  providing  facili- 
ties to  meet  its  needs.  The  increase  of  rolling  stock  in 
both  quality  and  quantity  during  this  period  was  as 
marked  as  the  improvement  and  increase  in  roadbed 
and  new  track.  In  1890,  the  reports  of  the  Interstate 
Commerce  Commission  show  that  there  were  in  this 
section  3,310  locomotives,  and  109,669  cars,  while  in 
1909,  the  number  of  locomotives  had  increased  to  7,772, 
and  the  cars  to  308,807.  During  this  period,  there  was 
a  distinct  tendency — especially  during  the  later  years — 
towards  the  enlargement  of  locomotives  and  cars,  and 
hence  the  numerical  figures  given  above  only  represent 
in  part  the  growth  of  your  railroads  in  their  rolling 
stock  intended  for  the  use  of  the  public  in  these  com- 


muni  ties.  This  increase  in  the  various  elements  which 
go  to  make  up  the  efficiency  of  the  railroads  of  the  South 
has  been  largely  in  excess  of  the  increase  in  population 
during  the  time  mentioned,  for  while,  from  1890  to  1909, 
the  single  track  mileage  had  increased  68.22  per  cent, 
and  second  track  54.23  per  cent.,  yard  track  and  sidings 
244.47  per  cent.,  locomotives  134.80  per  cent.,  and  cars 
181.58  per  cent.,  the  population  of  the  territory  served 
by  the  railroads  increased  from  1890  to  1910,  from 
13,845,801  to  18,776,059,  or  35.61  per  cent. 

Again  let  us  look  for  a  moment  at  the  capitilization 
and  investment  in  railroad  property  in  the  South  dur- 
ing the  same  period,  and  the  figures  on  this  line  show 
the  same  progressive  development.  In  1890,  the  capi- 
talization of  the  railroads  in  the  territory  above  men- 
tioned, which  capitalization  includes  the  outstanding 
stock  and  funded  debt  of  those  roads,  was  $1,153,374,- 
401.00.  This  capitalization  in  1909,  had  increased  to 
$2,265,101,150.00.  I  have  no  means  at  hand  for  ascer- 
taining how  much  of  this  capitalization  has  been  con- 
tributed by  the  people  of  the  South,  but  I  think  that 
it  is  safe  to  say  that  a  very  small  portion  has  been 
secured  from  that  source  and  I  take  it  that,  from  that 
reason,  much  credit  is  due  to  the  people — mostly  your 
own  citizens — who  have  had  the  character  and  ability, 
so  to  impress  themselves  upon  the  investing  public  of 
the  world  whereby  such  large  sums  of  money  have  been 
entrusted  to  their  care  and  placed  at  the  service  of  your 
communities,  to  be  primarily  benefited  by  the  con- 
struction and  upbuilding  of  these  railroads.  This 
money  has  been  secured,  and  expended  for  the  benefit 
of  this  territory,  although  the  return  thereon  has,  in 
most  cases,  been  very  meager,  and  the  average  return 
much  less  than  reasonable.     Interest  on  bonds  and 

10 


dividends  on  stock  which  have  been  received  on  account 
of  railroad  investments  in  the  South  from  1891  to  1909, 
both  inclusive,  represent  a  rate  of  interest  upon  this 
capitalization  ranging  from  2.54  per  cent,  to  3.60  per 
cent. 

I  am  quite  well  aware  that,  whenever  the  singularly 
slight  return  upon  railroad  investments  in  the  South  is 
commented  upon,  the  answer  of  those  who  are  critical 
of  railroads  usually  is  that  the  return  upon  the  capi- 
talization does  not  represent  usually  the  rate  that  is 
paid  upon  the  investment,  and  this  on  account  of  the 
fact  that  the  general  charge  is  made  that  the  stock  is 
watered,  and  that  if  the  moisture  were  eliminated  from 
the  capitalization  the  net  returns  would  be  much  larger. 

I  do  not  pretend  to  know  the  financial  history  of  all 
of  the  railroads  of  the  South,  but  I  do  know  the  history 
and  conditions  surrounding  quite  a  number  of  such 
roads;  and,  as  far  as  these  are  concerned,  and  I  veril}^ 
believe  as  far  as  the  roads  of  the  South  generally  are 
concerned,  there  is  but  little  foundation  in  this  general 
and  wholesale  charge  of  the  existence  of  what  is  known 
as  watered  stock  in  the  capitalization  of  its  railroads 
generally.  An  examination  of  the  financial  history  of 
each  of  the  roads  would,  in  my  judgment,  develop  the 
fact  that  each  issue  of  stock  represented  originally  an 
investment  of  actual  money  which  went  towards  the 
purchase  or  construction  of  the  property;  and  that,  in 
the  re-organization  of  such  properties,  which  re-organiza- 
tion became  necessary  in  the  history  of  practically  every 
road  in  the  South,  recognition  has  been  made  by  the 
new  company,  in  the  issuing  of  its  securities,  of  the 
stock  and  other  sectuities  of  the  old  company,  which 
stock  and  other  securities  represented  actual  invest- 
ments of  money. 

11 


No  small  portion  of  the  stock  of  existing  companies, 
which  is  now  frequently  being  criticized  as  "watered 
stock,"  represents,  as  a  matter  of  fact,  stock  issued  to 
the  original  owners  of  the  road,  which  was  turned  over 
after  the  war  to  some  new  company  being  organized 
for  the  purpose  of  constructing  and  maintaining  a  through 
line  of  travel,  and  represented  only  a  small  portion  of 
an  actual  investment  in  money.  This  stock,  in  fact, 
represented,  in  many  cases,  the  fortunes  of  not  a  few 
courageous  men  who  invested  their  all  in  the  railways 
of  the  South,  and  because  an  effort  has  been  made  to 
preserve  this  investment  to  the  original  owners  or  to 
their  successors  in  title,  the  opportunity  is  frequently 
sought  in  these  days  to  criticise  stock  issued  for  such 
purposes  as  being  imentitled  to  recognition  as  an  invest- 
ment. I  cannot  agree  with  this  theory,  but  have  always 
felt  that  the  money  which  was  originally  contributed 
is  a  part  of  the  investment,  the  benefit  of  which  is  now 
enjoyed  by  the  public  and  which  in  good  conscience 
should  be  preserved  to  those  entitled  to  it. 

Again,  if  we  look  upon  the  present  capitalization  of 
the  railroads  of  the  South,  even  upon  the  basis  of  their 
physical  valuation,  I  am  persuaded  that  this  capitali- 
zation is  in  reasonable  accord  with  what  would  be  the 
aggregate  value  of  the  properties  based  upon  a  fair 
appraisement  of  their  physical  value,  whether  such 
appraisement  were  based  upon  the  cost  of  original 
construction  or  the  present  cost  of  reproduction.  Of 
course,  it  is  a  fact  that  a  physical  valuation  of  these 
roads  has  never  been  made  and  probably  never  will 
be  made,  but  yet  a  comparison  of  the  present  capi- 
talized valuation  with  the  physical  valuation  of  other 
roads  not  very  dissimilar  ought  to  be  of  value  as  an 
aid  to  intelligent  public  thought  and  judgment  on  a 

12 


question  of  this  kind.  The  number  of  miles  of  railway 
reported  as  owned  in  the  Southern  States  east  of  the 
Mississippi  is  43,258  miles,  including  both  single  and 
double  track,  and  this  divided  into  the  sum  at  which 
these  roads  now  stand  capitalized,  as  represented  by 
their  outstanding  securities,  shows  an  average  per 
mile  of  $52,362.00,  a  valuation  which,  on  its  face,  does 
not  appear  to  any  one  familiar  with  railroad  conditions 
to  be  extravagant. 

These  figures,  however,  include  the  railroad  securi- 
ties held  by  railway  companies  and  are,  therefore, 
larger  than  the  stock  and  bonds  in  the  hands  of  the 
public,  which,  for  purposes  of  conservative  comparison, 
we  will  consider  as  the  net  capitalization.  The  Inter- 
state Commerce  Commission  does  not  give  the  amount 
of  stocks  of  southern  railways  held  by  the  railways. 
The  best  means  of  approximating  the  amount  of  these 
stocks  is  to  base  our  calculation  upon  the  percentage 
of  all  railroad  securities  owned  by  southern  railroads. 
The  latest  year  for  which  this  information  is  given 
covering  the  section  now  being  considered,  is  the  year 
1906.  In  that  year  the  railway  stocks  and  bonds  owned 
by  southern  railways  were  14.23  per  cent,  of  the  total 
capitalization.  Deducting  this  amount  from  the  total 
capitalization  we  reduce  our  estimate  of  the  average 
of  the  per  mile  valuation  of  the  roads  of  the  South  from 
$52,362.00  per  mile  to  $44,911.00  per  mile,  as  the 
average  net  capitalization  of  the  railways  of  the  South. 

As  stated  above,  no  attempt  has  ever  been  made  to 
ascertain  the  physical  value  of  the  railways  in  those 
states,  but  similar  valuations  have  been  made  in  quite 
a  number  of  states,  notably  in  the  States  of  Washington 
and  Minnesota;  and,  as  the  result  of  the  expert  val- 
uation   made    in   those   states   by  representatives  of 

13 


the  state  government,  we  find  (making  no  allowance 
whatever  for  the  franchise  values  of  the  property  as  a 
going  concern)  the  physical  valuation  to  be  as  follows : 
Washington  (1905),  $58,288.00  per  mile;  Minnesota 
(1907),  $47,454.00  per  mile. 

I  take  it  that  the  conditions,  though  different  in 
many  respects,  yet  are  not  so  different  as  to  lead  us  to 
beUeve  that  the  physical  values  of  the  railroads  in  the 
South  are  less  by  any  great  amount  than  the  average 
physical  value  of  the  railroads  in  the  prairie  territory 
of  the  Northwest,  and  this  comparison  certainly  leads 
to  the  probable  conclusion  that  the  existing  capitali- 
zation of  the  railroads  in  the  South  is  not  in  excess  of 
their  true  value  by  whatever  standard  that  value  may 
be  ascertained. 

The  conclusions  that  I  draw  from  the  two  lines  of 
information  which  I  have  sought  to  bring  to  your 
attention  is  that  the  present  securities  of  the  railroads 
in  the  South  fairly  represent  the  actual  investment  of 
money,  and  that  that  fact  should  receive  the  wholesome 
recognition  of  the  people  of  the  South,  and  the  further 
fact  that  the  expenditiire  of  this  capital  has  resulted 
in  the  acctimulation  of  railroad  properties  that  fairly 
represent  in  value  the  capitalization  which  is  dependent 
upon  the  roads  for  a  reasonable  return. 

I  am  persuaded  that  if  the  people  of  the  South  become 
reasonably  satisfied  of  the  correctness  of  these  propo- 
sitions many  of  the  problems  that  confront  the  railroad 
situation  in  this  section  will  be  solved,  for  when  once 
our  people  have  settled  in  their  minds  the  beUef  that 
the  nominal  capital  invested  in  railroads  in  the  South 
represents  in  truth  and  in  fact  a  real  and  substantial 
investment  of  money  to  the  amount  of  such  capital, 
which  also  has  been  used  in  the  production  of  existing 

14 


property  which  represents,  on  a  fair  valuation,  the 
amount  of  its  capitaHzed  value,  then  many  of  our 
difficulties  will  be  removed  and  little,  if  any,  legisla- 
tion will  be  adopted  in  the  future  which  may  result  in 
crippling  our  railroads.  I  say  this  because  I  know  the 
people  of  the  South  to  be  fair-minded  and,  on  any 
question  concerning  which  they  have  been  informed, 
there  need  not  be  any  fear  of  their  acting  as  the  con- 
ditions may  demand. 

And  now,  coming  to  the  question  of  what  the  pros- 
pects of  the  railroads  in  the  South  are :  From  my  obser- 
vation and  general  knowledge  of  the  southern  section 
of  our  cotmtry,  I  unhesitatingly  express  the  opinion 
that  there  is  no  section  of  our  country  that  has  a  brighter 
prospect  for  full  development  by  its  railroads  than  that 
section  lying  south  of  the  Ohio  and  east  of  the  Missis- 
sippi Rivers,  and  extending  also  westward  from  the  Mis- 
sissippi River  on  the  northern  border  of  the  Gulf  of 
Mexico,  provided  an  energetic,  comprehensive,  and 
proper  financial  support  is  given  to  the  matter  of 
better  farming,  thereby  diversifying  your  crops,  enrich- 
ing your  lands,  utilizing  your  water  power,  and,  in 
fact,  bringing  this  vast  area  of  tillable  and  productive 
land  into  and  under  correct  and  effective  cultivation. 
We  are  the  most  wasteful  people  in  the  world  with 
respect  to  the  cultivation  of  the  soil.  Thousands  upon 
thousands,  and  I  doubt  not,  millions  upon  millions,  of 
acres  of  land  are  lying  unproductive  within  the  terri- 
tory which  I  have  mentioned  that  only  need  proper 
cultivation  to  produce  that  which  brings  capital  into 
your  agricultural  districts,  communities,  towns,  and 
cities.  Mark  me,  that  unless  the  attention  of  your 
people  is  drawn  to  these  questions  in  a  manner  that 
will  convince  them  of  the  necessity  of  producing  more 

15 


to  the  acre,  competition  will  become  so  great  from  other 
countries  that  you  will  be  in  danger  of  losing  your 
prestige  and  preeminence  upon  the  lines  of  progress 
along  which  the  South  is  most  capable  of  development. 
I  submit  for  the  consideration  of  the  growers  of  the 
principal  crop  of  the  South,  viz.,  cotton,  if  it  is  not 
within  your  power  by  scientific  methods  to  increase  the 
amount  of  cotton  raised  per  acre  to  a  considerable 
extent.  But  you  should  not  be  satisfied  with  merely 
being"  represented  before  the  world  as  the  grower  of 
one  article,  notwithstanding  the  common  parlance 
"Cotton  is  King."  You  have  the  best  climate  on  the 
face  of  the  globe.  Your  section  lies  midway  between 
the  extremes  of  cold  and  heat;  you  are  not  in  an  arid 
section;  you  have,  as  a  rule,  sufficient  rainfall  to  furnish 
moisture  necessary  to  the  growth  of  all  characters  of 
crops;  you  are  in  easy  access  to  transportation  to  all 
parts  of  the  world,  and  with  the  completion  of  that 
imdertaking  to  which  our  government  is  committed, 
viz.,  the  Panama  Canal,  you  will  then  be  at  the  door 
of  Central  America,  South  America,  and  many  thou- 
sands of  miles  nearer  to  the  Pacific  Coast,  China,  and 
Japan,  than  any  competing  section  or  territory.  Par- 
don me  for  giving  you  a  word  of  warning  that  you 
should  be  up  and  doing  in  preparing  yourselves  to  take 
charge  of  these  markets  when  they  will  be  opened  to 
you.  You  should  ask  your  representatives  scattered 
throughout  these  countries  to  inform  themselves  as  to 
their  requirements  and  as  to  their  methods  of  doing 
business.  Do  not  deceive  yourselves — you  cannot 
change  old  and  established  methods  in  the  foreign 
countries  without  patient  effort,  and  even  then  you  may 
never  change  them.  You  may  have  to,  and  I  believe 
you  will,  adapt  your  measures  and  methods  to  those 

16 


of  the  foreign  country  with  which  you  are  transacting 
business. 

And  now,  if  you  again  ask  me  what  are  the  ''Rail- 
road Prospects  of  the  South/'  my  reply  is  that  the 
future  and  additional  development  of  the  railroads  in 
the  South  is,  to  my  mind,  entirely  dependent  upon  the 
attitude  of  the  Southern  people  towards  the  railroads. 
Business  conditions  affecting  and  surrounding  the  South 
are  such  as  invite  and  demand  the  further  extension 
of  existing  roads  and  the  construction  of  many  new 
lines.  The  management  of  the  roads  now  serving  this 
section  are  fully  alive  to  this  situation.  They  are 
ready  to  seek  further  capital  to  carry  on  these  improve- 
ments, but  their  experience  during  the  past  few  years 
brings  home  the  fact  that  those  who  have  been  in  the 
habit  of  furnishing  money  are  imcertain  as  to  the  atti- 
tude of  the  Southern  people  towards  these  investments. 
In  the  event  that  it  appears  that  the  well-defined  pol- 
icy of  the  states  of  this  section  is  to  see  to  it,  as  far  as 
legislation  is  concerned,  that  every  investment  in  rail- 
road property  shall  have  a  fair  chance  to  work  out  a 
reasonable,  if  not  a  liberal,  return  upon  the  investment, 
then  I  know  that  ''Railway  Prospects"  will  be  very 
bright  for  this  favored  section;  but,  on  the  contrary, 
if  it  shall  appear  that  the  railroad  proposition  is  to  be 
a  political  issue  upon  which  politicians,  or  even  states- 
men, are  to  run  for  office,  then  I  know  that  the  mana- 
gers of  your  railroad  properties  will  not  be  able  to  go 
into  the  money  markets  and  secure  the  funds  for  a 
new  road,  and  difficulty  will  be  had  in  sectuing  funds 
for  proper  maintenance  and  improvement  of  the  exist- 
ing roads. 

It  seems  to  me  that  recent  history  has  demonstrated 
that  the  day  is  past  when  the  railroad  question  can  be 

17 


properly  dealt  with  as  a  political  proposition.  In  fact, 
it  is  altogether  an  economic  proposition  and  cannot  be 
successfully  handled  by  the  politicians,  however  sin- 
cere may  be  their  ultimate  purpose.  Such  attempts 
have  always  resulted  in  disaster  to  the  roads  as  well  as 
to  the  community.  I  do  not,  however,  conceal  from 
myself  the  fact  that  all  railroads  are  in  some  measure 
monopolies  and  as  such  should  be  subject  to  the  regu- 
lating hand  of  the  body  politic.  In  the  working  out 
of  our  system,  we  have  established  both  for  the  nation 
and  for  most  of  the  states,  commissions,  whose  duty 
it  is  to  exercise  regulating  influences  to  prevent  the  evils 
that  arise  from  monopoly;  and  if,  as  the  years  go  by> 
it  shall  appear  that  these  bodies  will  be  able,  with  equal 
hand,  to  protect  all  sections  from  undue  discrimina- 
tion and,  at  the  same  time,  preserve  to  the  railroads 
such  rates  that  the  revenues  shall  be  remunerative, 
then  I  look  forward  to  the  early  day  when  railway 
development  in  the  South  shall  take  steps  far  in  advance 
of  any  section  of  this  country. 

One  more  word  and  I  have  finished.  All  of  these 
things  I  believe  will  be  finally  and  best  accomplished 
when  the  people  of  the  South  get  in  the  habit  of  owning 
their  own  railroads.  Stocks  and  bonds  of  these  com- 
panies can  be  purchased  on  the  open  market  to-day  at 
prices  which  will  justify  a  reasonable  return  under  fair 
and  just  governmental  regulations,  and  I  do  not  know 
any  better  opportunity  for  investment  by  the  people 
of  the  South  than  in  the  securities  of  their  own  trans- 
portation companies. 


18 


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